Windfall tax risks severely damaging investment in vital renewable energy projects

Although the Chancellor acknowledged that Britain is a global leader in renewable energy, and that we need to move to energy independence as fast as possible, he announced that renewable electricity generators face a 45% windfall tax from January next year until March 2028. The windfall tax for the oil and gas sector will be set at a lower rate of 25% to 35%. 

He also announced that renewable generators will not be granted any equivalent investment allowances that are available to investors in oil and gas extraction. The new Electricity Generation Levy will not be applied to gas or coal power plants, and instead will only target renewable and low carbon generators.

New wind and solar projects are the UK’s cheapest sources of new power – up to ten times cheaper than gas, so they have a key role to play in protecting consumers against the exorbitant cost of fossil fuels which has caused the energy crisis.

Renewables generated 40% of the UK’s electricity last year, more than half of which came from onshore and offshore wind. Wind alone generates enough electricity to power more than 20 million UK homes all year round, and saves over 33 million tonnes of carbon emissions annually. Opinion polls consistently show the overwhelming majority of people throughout the UK support renewable energy and want projects built in their local area.

RenewableUK's CEO Dan Mc Grail said:"This windfall tax on low carbon power risks deterring investment, at a time when the Chancellor should be incentivising clean energy. Unlike in oil and gas, under this levy companies which are making significant investments in renewables will get no tax relief and will be hit by a higher windfall rate.

"Any new tax should have focussed on large, unexpected windfalls right across the energy sector, instead profits at fossil fuel plants are inexplicably exempted from the levy. Many renewable generators are on long-term, fixed price contracts and most others sold their power for this winter over a year ago, so they haven't been making excess profits.

“We need to attract more than £175bn in new wind farms and our supply chain over the course of this decade, so we need to make the UK one of the most attractive destinations for private investment in renewables. Ministers now need to work with the industry to ensure that the implementation of these plans ensures a level playing-field, rather than imposing unfair burdens on renewables.  

"As we look ahead to next winter, we need the Government to implement our proposals for new power contracts that would cut costs for consumers and provide long-term certainty for investors. The current support mechanism for renewables, Contracts for Difference, is delivering new power cheaper than any other system, so it's the right model to focus on as we move forward”.